Wages

In the last few years, prompted largely by the work of Card and Kruger (1995), numerous articles on the employment effects of minimum wage legislation have appeared. This renewed interest in how minimum wages affect employment leads naturally to another question: What factors determine the minimum wage? Despite the ubiquity of minimum wage legislation, this question has received surprisingly little attention. One reason may be that in the U.S. the minimum wage is legislated at the federal rather than at the state level of government. Since this federal wage changes only occasionally, most U.S. studies have been limited to cross-sectional studies that focus on how the characteristics of the states, and the party affiliation of legislators, influence the vote on proposed changes in the federal minimum wage (Silberman and Durbin, 1970; Kau and Rubin, 1978; Bloch, 1980; Seltzer, 1995).[1] However, as pointed out by Baker et al. (1999), Canada offers some unique advantages for minimum wage studies: Since the Canadian minimum wage is under provincial, not federal jurisdiction, there has been substantial variation in the level and timing of changes in the wage across provinces, thus providing the opportunity to explore a relatively rich panel data set. To date, only one... study (Blais et al., 1989) has investigated the determinants of provincial minimum wages using a pooled data set extending across eight years (1975 to 1982) and nine provinces....

As noted, U.S. studies have usually been cross sectional and have examined what variables influenced congressional voting for increases in the federal minimum wage.[3] For example, Bloch (1993) related state wage levels and proportions of unionized employees to votes by senators to amend the 1977 and 1989 Federal Labor Standards Act and thereby increase the minimum wage. For each year he found only the union variable increased the probability of an in-favor vote - and only for Republicans, since Democrats almost universally...